WASHINGTON, DC - JANUARY 24: U.S. President Barack Obama delivers his State of the Union address before a joint session of Congress on Capitol Hill January 24, 2012 in Washington, DC. The president made a populist pitch to voters for economic fairness, saying the federal government should more do to balance the benefits of a capitalist society. (Photo by Saul Loeb-Pool/Getty Images)

Photo: Pool, Getty Images

WASHINGTON, DC - JANUARY 24: U.S. President Barack Obama delivers...

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In this Wednesday, Oct. 12, 2011, photo, Dan and Maggie Micoff stand in front of their house in Marine City, Mich. The Micoffs bought their two-bedroom home in the Detroit suburb in 2003. They paid $119,000. Eight years later, they're underwater with a 6 percent loan. Today's record-low mortgage rates are out of reach for millions of U.S. homeowners who would benefit from them most, but the Obama administration is hoping at least 1 million of these borrowers will take advantage of its refinancing program under the more lenient rules unveiled Monday, Oct. 24, 2011. (AP Photo/The Port Huron Times Herald, Mark R. Rummel)

The Obama administration plans to unveil in the next few weeks a new proposal to let homeowners who are current on their mortgage refinance quickly and easily, even if they owe more than their homes are worth and their loan is not owned by Fannie Mae or Freddie Mac.

The plan, if it comes to fruition, could help many Bay Area homeowners who don't qualify for the government's existing refinance program for underwater borrowers because their loans were too big to be purchased by Fannie or Freddie.

Obama briefly mentioned the plan in his State of the Union speech Tuesday night.

He said, "I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low rates. No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won't add to the deficit and will give those banks that were rescued by taxpayers a chance to repay a deficit of trust."

The plan would require lawmakers' approval, which could be hard to get given the gridlock in Congress. Financial institutions would likely fight the new fee and, if unsuccessful, try to pass some or all of it on to customers.

The new plan would also give the government - which owns or guarantees about three-fourths of all home loans - an even larger presence in the mortgage market at a time when many politicians and voters would like to see it shrink.

A senior White House official who would not be identified declined to give specifics but confirmed that the program would be open to underwater homeowners whose loans are not owned by Fannie Mae or Freddie Mac.

Current limitations

Under the government's existing Home Affordable Refinance Program, homeowners who are current on their payments can refinance into a new loan that Fannie or Freddie will buy, but only if their existing loan was purchased by Fannie or Freddie on or before May 31, 2009.

That leaves out a lot of people in the Bay Area and other high-cost areas who bought homes during the real estate bubble with mortgages that were too big to be sold to Fannie or Freddie.

For example, the median sales price for all homes and condos in the Bay Area was $628,000 in 2006 and $639,000 in 2007. During those two years, 62.1 and 57 percent of home-purchase loans exceeded $417,000, the conforming-loan limit in effect at the time, according to DataQuick. In 2004, nearly 71 percent of loans surpassed the limit then in effect.

Many of those homeowners can't refinance the usual way because they are underwater and don't qualify for HARP because their loans are not with Fannie or Freddie.

Some Bay Area home buyers took out a conforming loan that was less than $417,000 but added a second so-called piggyback mortgage that has made refinancing problematic.

It wasn't until early 2008 that the conforming loan limit was raised to $729,750 in high-cost areas, but relatively few loans were made between that time and May 31, 2009, the HARP cutoff.

Fewer than 1 million homeowners participated in the original HARP program, far fewer than expected. Originally homeowners could not participate if their loan-to-value ratio exceeded 125 percent, but last fall the government removed that limit and relaxed underwriting requirements. Those changes are just taking effect and are expected to result in at least 1 million additional refinancings.

Taking on risk

The Obama administration was able to make these changes without congressional approval. It says the government took no additional risk by extending HARP to deeply underwater borrowers because Fannie and Freddie - majority owned by taxpayers - are already on the hook if those loans go bad. It says these refinanced loans will be more affordable and less likely to default.

However, the government will be taking on more risk if FHA refinances underwater loans that previously had no government backing. FHA will make loans up to $729,750, higher than the current Fannie/Freddie limit of $625,500.

He points out that homeowners who have been diligently paying off a large mortgage at an above-average rate since May 2009 or earlier are probably not going to default on a refinanced mortgage at a lower rate.

He adds that most borrowers who took out subprime loans that were not eligible for sale to Fannie and Freddie have already defaulted.

Mayer says it would "not be hard" to design a program that makes economic sense, but it could still be a hard sell. At a time when antimillionaire sentiment is running high, he can understand why some politicians and voters might not want the government "to refinance a $900,000 mortgage on a home worth $800,000."

The real estate website Trulia recently did an online survey with Harris Interactive that asked if helping people keep their homes is the right policy even it helps some undeserving homeowners.